A month-long downturn in cryptocurrency prices is adding fresh pressure to digital asset treasury companies (DATs), and Evernorth’s substantial losses on its recent XRP investment are quickly emerging as one of the most prominent marks of that stress.
Evernorth recently made headlines for its significant acquisition of large allocations of XRP. However, the timing may not have been any more opportune, or less, according to fresh analysis by on-chain data provider CryptoQuant.
Evernorth and DATs Feel the Heat as Crypto Losses Mount
Just weeks after building up its position in XRP, Evernorth now has around $78 million in unrealized losses. The drop demonstrates how sensitive DATs are to price fluctuations — not only in Bitcoin and Ethereum, but also in other tokens that might move with less liquidity and more volatility.
Evernorth is not alone. Shares of Strategy (MSTR), widely regarded as the first prominent corporate Bitcoin treasury model, have declined by more than 26% over the last month as the price of Bitcoin has retreated. Shares of Strategy are now down by more than 50% from their all-time high, according to market data.
Despite all that pressure, Strategy is still in relatively good shape. A report from BitcoinTreasuries indicates that the firm has an estimated average cost of around $74,000 per BTC for its reserves, implying that it still maintains a significant amount of paper profit on its Bitcoin holdings. NET.
More worrisome are the companies whose primary holdings reside in other major cryptocurrencies. BitMine, which holds more corporate Ethereum than any other company in the world, now has a nearly $2.1 billion loss on its unrealized Ether reserves. The firm now holds almost 3.4 million ETH, with over 565,000 being acquired in the last month alone, suggesting that accumulation persisted even as market momentum diminished.
Left watching the sector are analysts who see companies closely linked to the crypto market performance — and valuations for such companies becoming more strongly correlated — as providing less of a cushion for companies without diversified revenue models when prices tumble.
A recent report highlighted that retail investors have collectively lost approximately $17 billion as a direct result of investing in companies that adopted the DATs model.
Also, the premium these companies used to command over their net asset value of crypto holdings had vanished almost entirely at the time of analysis, signalling a significant change in sentiment. The engineering risk associated with relying on crypto price appreciation is becoming increasingly front and centre for both equity investors and analysts.
Market researchers and venture analysts are comparing the DAT’s resurgence to the late 1990s dot-com bubble. In each case, a wave of companies emerged surrounding a revolutionary new technology. Long-held beliefs and innovation fueled others. Fast wealth-creating opportunities and speculative froth from investors propelled others.
Companies like Breed Capital believe that Bitcoin-centric treasuries may be better off looking ahead. Bitcoin’s liquidity, institutional involvement, and relatively stable regulatory environment mean it is less at risk of abrupt market deterioration than tokens with shallower order books.
DATs industry faces critical pressure
The situation playing out at Evernorth is likely to add to the already heightened scrutiny surrounding DATs firms — especially those whose business strategies are more dependent on token prices surging than stable operational revenue.
Investors are now focusing on whether these businesses have the ability to generate sustainable cash flow, whether their treasury policies insulate against downside risk, and whether they have meaningful diversification (real or anticipated) and liquidity in place.
These are the very issues that will decide which firms remain on the side of this market storm and which ones could be on the street, needing a “restructuring”.
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Source: https://www.cryptopolitan.com/evernorths-xrp-losses-strain-dats/
